Germany's China strategy is changing since Chinese import pressure has overshadowed the advantages of German exports to China.

Why Berlin supports a stricter EU trade policy against China October 13, 2026 Germany's cautious stance towards Beijing is showing cracks. For years, Berlin has blocked a tougher line against China's trade practices, which the European Union has labeled as "unfair". In recent months, this caution—fueled by fear that Chinese retaliatory measures could harm German exporters—has given way to a willingness to escalate. Last week, Federal Chancellor Friedrich Merz and French President Emmanuel Macron jointly wrote to the President of the European Commission, Ursula von der Leyen, demanding a new instrument to exclude a trading partner from the EU single market should unfair practices continue. The letter, clearly aimed at Beijing, warned that this measure was necessary against countries that "deliberately try to undermine fair market conditions through political or economic means." China's Ministry of Commerce warned that Europe would "bear the consequences" if it adopted the so-called kill switch plan, which was coordinated in the past week with the decisive trade talks between the EU and China in Beijing. The Costs of Stagnation Noah Barkin, China expert at the Rhodium Group, explained in an interview with the DW that the threats to Germany's export power "have convinced Merz and his closest advisors that the benefits of acting outweigh the costs of inaction." Before the pandemic, the two economies grew hand in hand, and German industry benefited from China's rise. However, according to data from Germany Trade & Investment, China fell to the ninth place as Germany's second-largest export market for the first half of 2026. Chinese competitors have rapidly closed the technological gap and benefit from significantly lower costs as well as state subsidies. This pressure is particularly felt in the German automotive industry, precision engineering, and chemical industry. Why Berlin's China Policy is Changing German car manufacturers had to accept a sharp decline in sales in China, which was once their second-largest market. According to the Rhodium Group, German auto exports to China fell by 66 percent between 2022 and 2025. Other analyses, such as those from the German Institute for Economic Research (IW), estimate a decline of over 54 percent for cars and car parts. The major German brands now face strong competition from Chinese electric vehicle (EV) manufacturers in other important markets, including Europe, which has led to a wave of layoffs and plant closures. In Germany alone, imports of new cars manufactured in China increased by 121 percent in the first seven months of the year, according to Destatis, the Federal Statistical Office. Vehicles from Chinese production accounted for almost 14 percent of total vehicle imports. "After losing market share continuously in China... [the competition] now also seems to be affecting its business in the European automotive market," explains Andreas Mischer of the Berlin Mercator Institute for China Studies (MERICS) to the DW. According to Mischer, the pressure from the powerful German automotive lobby was decisive for Berlin's "changed stance on trade policy protection instruments." Industry Pushes Harder Among the many German economic leaders who have demanded a tougher approach in recent months, Oliver Richtberg, head of foreign trade at the Association of German Mechanical Engineering and Plant Construction (VDMA), was perhaps the most prominent: "We are currently being deindustrialized by unfair measures—and most companies no longer want to accept that," Richtberg said in the newspaper Welt am Sonntag in August. According to Eurostat, the EU's trade deficit with China amounted to around 360 billion euros (402 billion US dollars) last year—effectively one billion euros per day—and has further widened in the first half of 2026. While Brussels is fighting against the dumping of cheaper Chinese goods, an independent law to protect industry and further measures against coercive practices face resistance in both Beijing and in their own country. Economic associations question industrial policy proposals The "Industrial Accelerator Act," proposed in March, aims to bring investment in the manufacturing industry back to Europe by giving preference to companies based in the EU in public tenders and subsidies. Foreign investments in key sectors would only be approved if European partners retained majority control—which Beijing called discriminatory. The European Automobile Manufacturers' Association (ACEA) warned in September that the draft law hardly helps counter the threat from cheaper Chinese competitors. In a position paper, the association stated that the incentive to produce within the Union must be large enough to "offset the extra costs." Berlin's greatest concern was that China could impose new export restrictions on rare earth metals and the magnets derived from them. China firmly controls these elements, which are indispensable for the German automotive, renewable energy, and defense industries. Bloomberg quoted unnamed German government officials last week with the statement that the new EU "kill switch" could be a "second strike weapon" if Beijing were to block these exports. A decision on the support for this measure will be made next week at an EU summit of heads of state and government. The EU is considering further trade measures Brussels is also planning to introduce unilateral restrictions on the number of hybrid vehicles China may export to the EU, as reported by Bloomberg on Wednesday citing unnamed sources. According to the ACEA, new hybrid and plug-in hybrid electric vehicles accounted for almost 37 percent of all new registrations in the EU from January to August. Possibly to avoid open confrontation, the EU and China agreed on a "joint understanding" in their trade talks in Beijing last week to reduce Chinese exports of hybrid and plug-in hybrid vehicles to the EU by more than half. According to a Commission representative, there will be an annual upper limit of initially 350,000 vehicles for hybrid vehicles from China in the future. This limit will then be increased by six percent annually, and the agreement has a duration of four years in total. In the current year, up to 800,000 Chinese hybrids are expected to be brought into the EU. This could affect "several million car exports from China to the European Union" in the next four years, according to EU Trade Commissioner Maros Sefcovic. MERICS has calculated that the EU is a more important export market for China than the USA. In the first half of the year, Chinese exports to the EU amounted to 254 billion US dollars, compared to 172 billion US dollars to the USA. This could give EU negotiators more bargaining power if they try to avoid a comprehensive trade war and protect Europe from China's recent export surplus at the same time. "The EU has more bargaining power than it sometimes believes," summarizes MERICS expert Mischer.